Over the last couple
of years Dr. Frost has been quietly building a substantial position in NYSE-listed
China small-cap Tiger Media (ticker: IDI). According to an SEC filing on July 12th, Frost now owns 31.5% of Tiger’s outstanding stock – including a 300,000
share open market purchase on July 10th.

After meeting with
management last week in Shanghai, I now see what Dr. Frost finds so
compelling.

TIGER MEDIA (ticker: IDI)

Tiger Media,
formerly SearchMedia is a Shanghai-based outdoor media company --- billboards
and LCD screens as advertising platforms --- a big business in China.

“We are a multi-platform media company
operating primarily in the out-of-home advertising industry. Out-of-home
advertising typically refers to advertising media in public places, such as
billboards, screen displays and street furniture. Our outdoor billboards, which
are mostly built on rooftops and with good visibility from long distances,
complement our network of LCD screen displays which are built on the street
level that captivates eye-level awareness. We are also developing an integrated
marketing platform to deliver online to offline (“O to O”) solutions in
addition to traditional media agency services, utilizing our furniture displays
at designated consumer direct-reach locations. We believe we are able to
provide multi-platform, “one-stop shop” services for our local, national and
international clients.“

MARKET & COMPETITION

The out-of-home
advertising industry in China is booming. The most prominent player is hedge-fund
favorite Focus Media (ticker: FMCN), which was recently taken private by Carlyle and Fosun at a $3.7 billion valuation. Rumors suggest Focus management was simply
fed up with the discount applied to Chinese companies traded on the US market
and will soon re-list in Hong Kong at an even higher valuation.

Aside from Focus
Media, there are private players like Tulip Media and other public players like
AirMedia (ticker: AMCN). None are
exactly alike. But they’re all trying to get a piece of the fast growing yet
fragmented out-of-home market that shows no sign of slowing down.

In early 2012, Tiger
hired a new CEO. Peter Tan was previously a corporate lawyer
and private equity fund manager. Before Tiger, CEO Tan invested in 40+ Chinese
companies. He was also an early investor, board member or observer in various
companies including out-of-home player AirMedia (ticker: AMCN) and highly
successful economy-hotel-chain Home Inns (ticker: HMIN).

That strategy, according
to a late 2012 roadshow presentation involves 2 key elements: (a) LCD ad
platforms at luxury shopping malls throughout China, and (b) billboards at economy-hotel
chain Home Inns (ticker: HMIN) which already has a presence in hundreds of
Chinese cities.

There’s also a hint in
the latest 10-K of a 3rd element to Tiger’s strategy:

“We are also developing an integrated
marketing platform to deliver online to offline (“O to O”)”.

This strategy would seemingly
target the hundreds of millions of mobile phone users in China – more and more
of whom are smartphone users.

TIGER MEDIA – INVESTMENT CONSIDERATIONS

Based on its current share price, it’s easy to dismiss Tiger Media as yet another questionable
Chinese small-cap. It’s had a slew of problems over the years including significant
accounting issues at companies it acquired.

But consider the
following:

The last three years
of company press releases show clear incremental progress toward a successful
turnaround.

The industry should continue to benefit from the
increasingly urban, affluent Chinese consumer MNCs and domestic companies want
to get in front of.

Finally, consider the
Dr. Frost factor:

U.S. billionaire Dr.
Frost is a savvy serial entrepreneur and investor. He’s had numerous massive
exits and is currently working on frequently acquisitive $2B+ Opko Health (ticker:
OPK) as Chairman and CEO.

As we saw from
Friday’s SEC filing, Frost continues to purchase Tiger stock. With 31.5%
ownership it’s fair to assume that he’s invested for the long-term.

Frost and his team at
Florida-based Frost Group are not only invested in Tiger’s stock but are also
actively involved in advising Tiger’s CEO. Notice too that Tiger’s General
Counsel is Joshua Weingard who also currently serves as Chief Legal
Officer for three other public companies with affiliations to The Frost Group.

Naysayers might say
this is a small investment for Frost. But the time spent and resources he’s
providing tell you he’s invested in making this a huge success.

CONCLUSION

Clearly, Tiger Media
is a speculative play. The market believes its days are numbered. But if its
days were in fact numbered, US billionaire Philip Frost would likely not be
wasting his time buying stock.

Of course, as with
every business Tiger must execute. They’re faced with a very competitive market
and large, established players.

But I came away from
a meeting with Tiger CEO Peter Tan in Shanghai last week with ever more
conviction that Tiger’s best days are ahead.

Finally, Tiger Media CEO Peter Tan has a substantial
incentive to execute. He owns millions of shares both personally and through
his investment vehicle. And for those concerned about a protracted China
slowdown, he’s not worried. With Tiger’s stock trading near $1 there’s little
downside risk.

2 comments:

is it inaccurate to say this company is being valued pro-forma end of year build-out at $350k per television screen owned? That seems like a ridiculous multiple for an LCD screen no bigger than the average home TV.